SO quotes George Soros in his latest.

I have come to distinguish between normal conditions and far-from-equilibrium conditions. In normal conditions, there is a tendency for the participants’ views and the actual state of affairs to converge or, at least, there are mechanisms at work to prevent them from drifting too far apart. I call these conditions “normal,” because that is what our intellectual traditions—including philosophy and scientific method —have prepared us for. I contrast them with far-from- equilibrium conditions, where the participants’ views are far removed from the actual state of affairs and there is no tendency for the two of them to come together.

Thanks, George. This actually helps explain the whole delusions thing. There is a huge disconnect between what seems to be happening – nothing remarkable, business as usual, and reality – the economy is heading for a major train wreck. Why is this so hard to see?

It is like watching an accident happening – all the vivid details in slow-motion. That train is going the wrong way. Can’t be. That is too wrong. It really, really is a very deep hole where it isn’t supposed to be. Crash!#@! Believe it. It really can happen. It really is happening. It isn’t normal, but that doesn’t mean it can’t happen.

Moving right along, then. Now what? Fannie and Freddie do jumbo and alt-A loans? SO says it won’t fix the problem. There are just too many houses. There is too much credit debt that can’t be paid. The Fed may be doing a fine job putting their finger in the dike by stepping up as the lender of last resort to get the commercial paper log jam unstuck. However, the real problem of massive un-repayable credit debit is way beyond that.